Dynamic changes in the competition for fertilizer
Rail volume would decrease in some routes. Results indicate that imports and shipments from import ports probably will decline and mostly be replaced by domestically produced products. Of particular importance is the prospective reduction in rail shipments from the Texas gulf.
The implications of these results are important. For growers, the results should be viewed as positive. The combination of new fertilizer plants producing at a lower cost ultimately will result in lower fertilizer costs and probably less volatile prices because, in part, the fertilizer will be produced with more stable domestic natural gas that is declining in value. The implications for the fertilizer industry probably are more dramatic. This is an industry characterized by volatile demands and large-scale manufacturing, which have high fixed and low marginal costs. Further, the nature of the entrants/expanders is such that they have differing motives for entry.
In the end, current fertilizer operators will face new plants that are more diverse in several respects. These reasons all suggest that there probably will be more new plants than needed, so they will be operating in a market with volatile demands and declining marginal costs. The impact of this would result in suppliers seeking to differentiate their products and distribution systems to seek competitive advantages.
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